Australian Senate rejects cap & trade bill

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Carbon finance, emissions trading & offsets:Friday, 14 August 2009

The Australian Senate has rejected the Rudd government’s emissions trading legislation after all non-government senators voted against the bill. The outcome was fully expected and is the latest stage of an intense political stand-off in the nation’s parliament that may yet end in an early election.The Carbon Pollution Reduction Scheme (CPRS) would install a cap and trade scheme on 70 per cent of Australia’s emissions, including the transport sector, but has met stiff opposition from businesses in the country’s lucrative resources sector and the conservative opposition parties. The wider business community wants the scheme passed in the interests of investment certainty.The government now has the option of negotiating amendments with the main opposition parties, the Liberal/National coalition, to win passage through the Senate, or resubmitting the original bill in three months time. A second rejection of the original bill would allow the government to call an early election.Bloomberg reports Prime Minister Kevin Rudd saying today that his preferred option was to see the CPRS passed without resorting to an election, although it would be a poll he would almost certainly win. Trailing badly in the polls, the coalition is under pressure to support the bill to avoid a damaging election loss. Were the bill to be passed in November, this would lock in Australia’s climate change response on the eve of the climax of UN talks in Copenhagen over a new global climate treaty to follow the Kyoto Protocol.These Australian political events are not dissimilar to the current state of US climate legislation where the Waxman-Markey cap and trade bill, supported by President Obama, is also facing its biggest hurdle in the US Senate. Like the US bill, the Australian legislative package also includes laws to promote investment in renewable energy. The government wants to set a national target to produce 20 per cent of power from renewable sources by 2020. With this initiative enjoying wide cross-party, business and community support, the government is under pressure to de-couple it from the cap and trade bill to allow it to pass the Senate quickly.The opposition leader, Malcolm Turnbull, has already had nine proposed changes to the bill rejected by the government. They would have increased assistance to trade-exposed industries, power companies, coal-miners and consumers, as well as allowing farmers to generate carbon offsets from changed soil and fertilizer management practices as envisaged in the US bill. Turnbull this week also proposed consideration of an economic consultants’ report recommending the CPRS be changed to a hybrid emissions trading system; under which power utilities would be subject to a baseline and credit scheme while the other sectors remained cap and trade.